2019 (8) TMI 903 - SC - Indian Laws

Supreme Court Rules in Favor of Appellants, Refunds Rs. 40 Crores

M/s Kut Energy Pvt. Ltd. & Ors. Versus The Authorized Officer, Punjab National Bank, Large Corporate Branch, Ludhiana & Ors.

The Supreme Court set aside the High Court's judgment, directing the refund of Rs. 40 crores deposited by the appellants, emphasizing the ... Withdrawal of the Deposit of a sum, which was deposited to prove bonafides when revised order was made - deposit was not towards satisfaction of the debt in question - refund of the same is sought for - loan taken by Consortium Bank could not be repaid as the appellant was declared Non-Performing Asset (NPA) - HELD THAT:- In the present case the deposit of ₹ 40 crores in terms of the order of the High Court on 11.10.2017 was only to show the bona fides of the appellants when a revised offer was made by them. The deposit was not towards satisfaction of the debt in question and that is precisely why the High Court had directed that the deposit would be treated to be a deposit in the Registry of the High Court. In the case of AXIS BANK VERSUS SBS ORGANICS PRIVATE LIMITED AND ANOTHER [2016 (4) TMI 917 - SUPREME COURT] the questions that arose for consideration were whether the money deposited, in order to maintain an appeal under Section 18 of the SARFAESI Act before the Debts Recovery Appellate Tribunal (DRAT) could be adjusted towards the amount due to the concerned bank and whether the concerned bank had a lien over the money so deposited - Going by the law laid down by this Court in Axis Bank3 the ‘secured creditor’ would be entitled to proceed only against the ‘secured assets’ mentioned in the notice under Section 13(2) of the SARFAESI Act. In that case, the deposit was made to maintain an appeal before the DRAT and it was specifically held that the amount representing such deposit was neither a ‘secured asset’ nor a ‘secured debt’ which could be proceeded against and that the appellant before DRAT was entitled to refund of the amount so deposited. The submission that the bank had general lien over such deposit in terms of Section 171 of the Contract Act, 1872 was rejected as the money was not with the bank but with the DRAT - In the instant case also, the money was expressly to be treated to be with the Registry of the High Court. The appellants are entitled to withdraw the sum deposited by them in terms of said order dated 11.10.2017. Their entitlement having been established, the claim of the appellants cannot be negated by any direction that the money may continue to be in deposit with the Bank. Appeal allowed. Issues Involved:1. Validity of the notices issued under Section 13(2) and Section 13(4) of the SARFAESI Act.2. Appropriateness of the High Court's interference in writ jurisdiction.3. Entitlement to the refund of the deposited amount of Rs. 40 crores.4. Application of the principles laid down in the Axis Bank case regarding pre-deposit and lien.Detailed Analysis:1. Validity of the notices issued under Section 13(2) and Section 13(4) of the SARFAESI Act:The appellants challenged the notices dated 15.03.2017 and 22.08.2017 under Section 13(2) and Section 13(4) of the SARFAESI Act, respectively, along with the sale notice dated 29.03.2017 and the order dated 06.10.2017 passed by the Tribunal refusing interim relief. The High Court initially issued directions allowing the appellants to deposit Rs. 140 crores to establish their bona fides. However, the Bank rejected the revised OTS proposal for Rs. 140 crores before the full amount was deposited.2. Appropriateness of the High Court's interference in writ jurisdiction:The Supreme Court noted that the High Court should not have interfered in the matter while exercising writ jurisdiction, as an alternate remedy was available to the appellants. This was emphasized in the judgment of 'Authorised Officer, State Bank of Travancore and Anr. Vs. Mathew K.C. (2018) 3 SCC 85,' which cautioned against such interference. Consequently, the Supreme Court set aside the impugned orders passed by the High Court.3. Entitlement to the refund of the deposited amount of Rs. 40 crores:The High Court denied the appellants' request for a refund of Rs. 40 crores, stating that the amount should be kept in deposit with the DRT until the decision of the suit filed by the lead Bank (Punjab National Bank). The Supreme Court, however, found that the deposit of Rs. 40 crores was made solely to show the bona fides of the appellants and was not towards the satisfaction of the debt. Citing the Axis Bank case, the Court held that the appellants were entitled to withdraw the deposited amount, as it was not a 'secured asset' or a 'secured debt.'4. Application of the principles laid down in the Axis Bank case regarding pre-deposit and lien:In Axis Bank vs. SBS Organics (P) Ltd., the Supreme Court ruled that a pre-deposit made to maintain an appeal under Section 18 of the SARFAESI Act is neither a 'secured asset' nor a 'secured debt' and should be refunded if the appeal is disposed of. The Court rejected the bank's claim of a general lien over such deposits. Applying these principles, the Supreme Court in the present case directed that the amount deposited by the appellants be returned to them, as it was to be treated as a deposit with the Registry of the High Court and not with the Bank.Conclusion:The Supreme Court set aside the High Court's judgment and directed the refund of Rs. 40 crores deposited by the appellants, along with any accrued interest, within two weeks. The appeals were allowed, emphasizing the non-applicability of bank lien over the deposited amount and the improper exercise of writ jurisdiction by the High Court.